Morning CME Globex Update:
Europeans are finally expecting some relief from the recent heat wave, and the surge of bullish concern about global wheat, feed grain and oilseed yields appears to be diminishing. The S&P 500 Index is expected to open within 16 points of its record high from Jan. 26.
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Corn prices may hold on to small gains Wednesday morning, but they have so far spent the entire week within a quiet, 6-cent trading range. Global stock markets experienced some higher movement Wednesday, and U.S. stocks could soon hit a record high, which would make extra capital available to investors and potential commodity speculators. However, the 'managed money' in the corn futures and options markets has so far remained net-short (bearish), and this week's relatively low trading volumes suggest these traders are staying mostly neutral until new fundamental numbers kick the market into one gear or another -- either forward or reverse. The USDA's projections for global supply and demand will be closely watched in the August WASDE report, which will be released on Friday. The DTN National Corn Index, an average of cash bids around the country, was unchanged at $3.40 Tuesday, showing national average basis steady at 31 cents under the September futures contract.
Despite increasingly bullish concerns about global oilseed production, the soybean futures contracts in Chicago may struggle to find buyers above previous resistance levels until the U.S.-China tariff scenario normalizes. Monsoon season in Asia has sputtered in the short-term, which affects palm oil production, and Malaysian palm oil futures did surge higher Wednesday. It's the heat wave and ongoing drought in Canada's canola-producing regions that really worry the global oilseeds market, however, and November canola futures have gained 5% over the past three weeks, with a significant portion of that in Wednesday's session alone. The United States' biggest oilseed, soybeans, also faces deteriorating conditions during the critical pod-filling stage. Rainfall in the 24-hour forecast is mostly missing dry Missouri and the dry Mississippi Delta region. The DTN National Soybean Index came to $8.26 Tuesday, showing average basis bids weaker at 80 cents under the November futures contract. Compared to what would be "normal" for this time of year, basis bids at the Gulf, at Midwestern processors, and at country elevators are all depressed by 20 cents to 30 cents, ostensibly due to the lack of upcoming export business.
At some point, every rally eventually ends once all the willing buyers have filled their needs at a certain price point, and as the heat wave finally wanes in Europe, it seems so does the bullish fervor in the European wheat market. It may just be a temporary pause in the rally, and the chart certainly isn't expected to collapse in a bubble-bursting pattern, but for now on Wednesday, wheat futures gains are quiet. The December Euronext wheat chart has so far posted a stunning 25% rally from its June low, justified by poor harvest results or drought expectations in every major wheat-exporting country on Earth, including Russia and Canada and the U.S., where spring wheat harvest is still ongoing and encountering below-average yields. DTN's collected SRW Index was $5.39 Tuesday (29 cents under the September Chicago futures contract); the HRW Index was $5.60 (19 cents under the September KC contract); and the Spring Wheat Index was $5.80 (weaker day by day and now 47 cents under the September Minneapolis contract).
Elaine Kub can be reached at firstname.lastname@example.org
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